At one point or another, some of us find ourselves in a difficult financial situation. It is okay, it happens, and while there are other options, too, payday loans are a quick way to ensure a needed sum in our possession. These types of loans aren’t used as often as traditional bank loans but can sometimes prove to be more beneficial.
A bank would rarely let us loan less than a thousand dollars, the payoff period is longer with them, and the ultimate interest value becomes larger. However, payday loans are used in a certain specific niche which explains their uniqueness to all other loan types. They start with an overall minimum of $100 and rarely go over $2,000. You need to pay such a loan off in a couple of weeks or a month, and this enables faster loan elimination – so the fees remain acceptable to the casual borrower.
Another backdoor to settling your payday loan comes with the rolling over option. If we fail to follow our payment schedule and the due date passes us, there is always the possibility to extend the loan duration. Keep in mind, this move increases interest over time and our advice is to strive for the swiftest payoff on payday loans. Roll over terms vary depending on state and loan provider but usually, all of them follow a similar policy on the matter.
One of the main differentiation to traditional bank loans comes with the absence of a Good Credit Score Requirement. Even poor credit score owners can apply for a payday loan and more often than not – get it. Approval here is easier and way faster. If an urgent financial need strikes a person, payday loans are a good immediate answer to it. And with such light approval process, they are on the top of the Speedy Solutions list.
What more do you need to know?
The convenient speed and accessibility of payday loans don’t come without a price, however. Borrowers need to be alert that shorter payout timeframes carry higher interest rates and a careless approach to settling the debt may lead to bigger complications. As most payday loans require a paycheck amount to be deposited until we clear the debt, there isn’t much room to improvise when it comes to zeroing out the owned money value. Think of it as an advance on your salary – you get it earlier but have to pay extra for the service.
Another thing to mention is that payday loan vendors are usually smaller companies looking to capitalize on their funds in the most efficient way they see fit. It’s a legitimate business but it serves a narrower volume of customers. As more people prefer the lower set interest rates of banks and loan enterprises, payday loans fall in the Untraditional Category. Just a verification of your monthly income is needed to pass as Accepted for a payday loan. And while credit history, place of residence, credit scores, and other factors may turn the tides around, they aren’t such a must when it comes to getting a payday loan.
Alongside being the quickest way to get money almost instantly, payday loans are also a bit tricky. Some providers can equal to up to 500% APR (annual percentage yield) from you, and this should be considered with great attention. Put simply, it is not advised to take out a $400 payday loan if your intention includes longer than one-month repayment period. With an average interest rate of 35% per loan, payday loans are both a saving grace and a possible abyss if we don’t engage them with the proper mindset.
Having said this, payday loans are a solid solution to financial problems in the short-term frame but fall short in usefulness when it comes to longer periods. They are an adequate option if you stumble upon unexpected costs but they won’t resolve deeper financial issues. In the latter occasions, it is more sensible to look for other options, more suitable for your situation. This is mainly said because overdue loan payments can result in overdraft costs, loan collection services, and more. After all, there isn’t a free loan out there so we just need to know the right types to go for when needed.
Payday loans have slowly made their way into banks as well but the only difference here is the lender’s outlook. Traditional banks are just trying to compete on all available fronts and this is understandable. They won’t offer you better interest rate conditions for payday loans – they may seem a bit more reliable as a vendor but that’s mostly in our heads. In addition, bank-provided payday loans can be more damaging to our financial state as existing checking accounts in banks limit our ability to choose payoff times and amounts.
As you have seen from the previous paragraphs, payday loans are the polarized member of the Loan World. They are built from controversial parts to take into consideration and solely depend on our exact financial needs. They can be highly beneficial in dire times but prove to be unsuitable for long-term problem resolution.
Another beneficial side of payday loans is the absence of a good credit score to back up our application. Furthermore, having a low cap of acceptance time at 30 minutes, there isn’t a more instantaneous loan to take advantage off. They can come in handy in lots of scenarios and having them as an option is nice. The simplified application form and process add up to getting the borrowed money in (sometimes) less than an hour, too. This enables customers to efficiently deal with financial anxiety.
An overall last-resort-type of loan, payday loans still treat their clients with the expected professionalism. Repeated borrowers often get lower interest rates, higher loan cap, and lighter payoff terms when it comes to frequency and amount of deposits. Although we don’t recommend using such a service every time you feel financially anxious, payday loans are a certified way to escape a momentary money pit.